Microsoft faces $90.6 bn AI spending test in earnings

Microsoft faces a Wednesday earnings test with analysts expecting about $90.6 billion in fiscal first-quarter revenue and $4.72 a share, Seeking Alpha’s Wall Street Breakfast podcast transcript published Oct. 25 said.

The estimate frames the scale of the AI spending debate: Ricardo Fernandez estimates Microsoft spends roughly $200 billion annually on data-center capacity, equal to about 55% of the $362.4 billion annualized revenue run rate implied by the quarterly estimate, according to Atlas360 calculations.

Investors are likely to focus on Azure growth, AI monetization, capital spending and whether Microsoft’s infrastructure investment can generate adequate returns. The results come in a week when Alphabet reports alongside Microsoft on Wednesday and Amazon reports Thursday.

The transcript presented a split analyst view on Microsoft. Seeking Alpha analyst Michael Del Monte rates the stock Strong Buy, citing enterprise AI adoption, the company’s security position and custom Maia chips as support for cloud growth and eventual margin expansion.

Hunting Alphas has a Hold rating and expects Azure growth could reach about 45% next quarter despite capacity limits. The analyst points to commercial remaining performance obligations, contracted revenue not yet recognized, as evidence that demand extends beyond OpenAI.

Fernandez rates Microsoft Sell and warns that long-term leases, recurring graphics-processor replacement costs and reliance on demand from OpenAI and Anthropic could weigh on cash flow and return on invested capital.

The Federal Open Market Committee, the Fed’s rate-setting panel, is expected to keep the fed funds rate at 3.75%-4% on Wednesday after a quarter-point increase last month. Fed funds futures priced just a 10% chance of another increase.

There will be no dot-plot update, the Fed’s periodic publication of officials’ rate projections, leaving Chair Kevin Warsh’s press conference as the main policy signal. Wells Fargo economists said on the episode that “the meeting itself probably will be on the quieter side.”

“We suspect the Chair will channel his inner Greenspan and strive to mumble with great incoherence in the press conference,” Wells Fargo economists said. They said any lean from Warsh would probably be hawkish because inflation data remain hot and they see a high likelihood of a December rate increase.

Seeking Alpha analyst Damir Tokic has a different rate view. He says the Fed’s next move will be a cut, with a small chance it could come Wednesday, because he sees an AI bubble bursting and financial-stability risks moving ahead of inflation in policy priorities.

The wider earnings calendar includes Verizon, Welltower, Nucor and Public Storage on Monday; Visa, Coca-Cola, Boeing and UPS on Tuesday; and Eli Lilly, Mastercard, Intel, Merck, Caterpillar and Shell on Thursday.

JetBlue creditors are organizing with advisers as the airline deals with cash burn and rising oil prices, The Wall Street Journal reported. JetBlue plans to update its progress and financial outlook during its third-quarter earnings call Tuesday.